AB InBev-Modelo Deal May Be Derailed by Slow-Track Judge

By Tom Schoenberg -
Feb 11, 2013

Anheuser-Busch InBev NV’s bid to buy
Grupo Modelo SAB may face an obstacle unforeseen by the parties
when the Justice Department sued to block the deal -- assignment
of the case to Washington’s slowest federal judge.

U.S. District Judge Richard Roberts, who was randomly
picked to handle antitrust litigation over the $20.1 billion
deal, carries the largest backlog of unfinished cases and
unresolved motions among his Washington colleagues, according to
federal court data.

Last year, Roberts had 73 motions pending for more than six
months -- almost three times more than the next slowest judge --
and more than 50 cases pending more than three years. In one
2003 case involving $190,000 of insurance payments, he took more
than eight years to rule on a motion to dismiss.

“It helps the Justice Department,” Michael Carrier, an
antitrust law professor at Rutgers University, said in an
interview. “If they have a judge that is this slow -- and
obviously this is something they could not have prepared for --
there’s no doubting this will help the government.”

Delays in the AB InBev case could derail the deal if the
litigation pushes past the termination date called for in the
sale agreement. The parties have until Dec. 30 to complete the
transaction, and may extend it another 90 days if it’s in court.
After that, Modelo may be able to walk away with the $650
million breakup fee.

AB InBev’s shares slid 0.2 percent to 63.99 euros in
Brussels. They’ve fallen 7.7 percent since Jan. 30, the day
before the Justice Department sued to block the deal. Modelo’s
shares fell 13 centavos, or 0.1 percent, at 1:47 p.m. Mexico
City time. The stock has fallen 3.8 percent since the suit.

Continuing Talks

Talks between AB InBev, the world’s biggest brewer, and the
Justice Department were still proceeding when the suit was filed
on Jan. 31, people familiar with the matter have said.

If the case does continue in court, Roberts must
independently assess the government’s claim that the combination
of the largest- and third-largest brewers of beer sold in the
U.S. would violate antitrust law and “substantially lessen”
competition. He will have to set a schedule that includes when
to hold a preliminary injunction hearing, how many witnesses
will be interviewed and give testimony as well as what documents
the two sides must produce and exchange.

Settlement Pressure

The selection of Roberts could put additional pressure on
the company to settle rather than test the government’s case in
court, according to Edward Schwartz, an antitrust partner at
Steptoe & Johnson LLP in Washington, whose client once waited
six months for a final ruling from the judge on a settlement
with the department.

“I could imagine it increasing the motivation to some
degree to work something out,” Schwartz, who isn’t involved in
the case, said in a phone interview.

Marianne Amssoms, a spokeswoman for Leuven, Belgium-based
AB InBev, and Gina Talamona, a Justice Department spokeswoman,
declined to comment on Roberts’s assignment to the case.

Roberts, 59, was appointed to the court by President Bill
Clinton in 1998. He was previously chief of the criminal section
in the Justice Department’s civil rights division.

Marion Barry

Earlier, as an assistant U.S. attorney, he successfully
prosecuted Washington’s mayor at the time, Marion Barry, in 1990
on a drug charge.

“In my experience, I think he’s a very thoughtful, careful
judge,” Jeffrey Jacobovitz, an antitrust partner at Arnall
Golden Gregory LLP who frequently practices in the Washington
court, said in an interview.

In his 14 years on the bench, Roberts has handled about a
dozen antitrust matters, according to court filings. None went
to trial.

Six involved private lawsuits alleging price fixing or
other anti-competitive behavior against companies such as Fannie
Mae, AstraZeneca Plc and ExxonMobil Corp.

Schwartz, who represented Republic Services, said he staked
out Roberts’s chambers in an attempt to secure a signature from
the judge to allow the deal to be completed while the case was
pending.

Year End

“I did impress upon Judge Roberts the importance of a
ruling by year-end so the deal could close,” he said. “I was
pleasantly surprised it didn’t take as long as I feared it
might.”

Roberts then took six months to issue a final judgment
after a third party objected to the settlement.

One case on which he moved quickly was the Federal Trade
Commission’s 2010 lawsuit to block Laboratory Corp. of America’s
proposed $57.5 million purchase of Westcliff Medical
Laboratories Inc. Two days after the filing, he granted
LabCorp’s request to send the case to California.

On July 16, Roberts will become chief judge of the
Washington court, adding administrative duties. As chief, he’ll
oversee the court’s budget, security, media and U.S. agency
relations, as well as preside over the grand jury.

The chief judge traditionally doesn’t take new cases,
though he keeps his existing docket, according to Sheldon Snook,
administrative assistant to the chief judge.

Roberts, who declined to be interviewed on a matter
involving a pending case, has struggled with a backlog of cases
for more than a decade.

Fair, Quick

“It’s important to me that we decide cases fairly and
correctly, as well as efficiently and quickly,” Roberts told
the publication Legal Times in 2002 after it reported he was
consistently the slowest judge on the court. “I have been a
public servant most of my career, and I take seriously the
obligation to resolve disputes fairly and promptly.”

Follow-up articles by the weekly newspaper in 2006, 2008
and 2009 reported that he continued to maintain the largest
backlog of any judge on the court.

As of March 31, Roberts’s outstanding docket of 73 motions
more than six months old and 51 civil cases pending for more
than three years made him the slowest federal judge in
Washington, according to Administrative Office of the U.S.
Courts data. That’s 47 more motions and 21 more cases than the
next slowest judge.

Advantage Healthplan

One was a motion to dismiss a civil case filed against
Advantage Healthplan Inc. by a Washington-area hospital seeking
reimbursements for emergency care of five patients. It took
Roberts more than eight years to decide that the hospital could
proceed with claims against the insurer regarding two patients
it treated.

Nationally, Roberts ranks seventh in the backlog of motions
pending for more than half a year, according to court data.

By comparison, U.S. District Judge Ellen Huvelle, who
presided over the government’s antitrust case against AT&T
Inc.’s $39 billion bid for T-Mobile USA Inc., had no motions
pending longer than six months and just one case on her docket
longer than three years.

In the AT&T lawsuit, Huvelle sometimes made daily decisions
in an attempt to get the case to a trial in six months. Within a
week of the suit being filed, Huvelle had held a telephone
conference with the parties and scheduled a hearing where she
ordered both sides to be ready to talk about settlement
prospects.

At the end of last week, AB InBev and the Justice
Department jointly asked for a scheduling conference on Feb. 15
or as “soon thereafter as the court’s docket permits.”

Today, Roberts, saying AB InBev hadn’t responded to the
government’s lawsuit yet, denied the request for the session. He
didn’t set any new date or deadlines.

The case is U.S. v. Anheuser-Busch InBev NV, 13-cv-00127,
U.S. District Court, District of Columbia (Washington).